According to NSW Premier Morris Iemma, the dam will 'drought-proof' the areas of Newcastle and the Central Coast for the next 60 years, and will form part of a new water grid planned for the region. It will be built at Tillegra, north of Dungog, on the Williams river.
Construction of the dam - which will more than double the Hunter Valley's current water holding capacity - is expected to start in 2008.
According to local media, the latest figures show that the state is 93.6% drought declared - up 4% on last month.
